Construction output failing causes economic slowdown

FEARS that Britain’s economic recovery is losing momentum intensified yesterday after a steep drop in construction output in May.

PUBLISHED: 00:00, Sat, Jul 12, 2014

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The construction industry generates about 6 per cent of Britain's output [GETTY]

Despite bullish trading updates this week from builders such as Barratt Developments and Taylor Wimpey, official figures showed a 1.1 per cent contraction from the previous month.

The Office for National Statistics said output declined by 0.8 per cent in the three months to May – its biggest fall since October 2012 – while annual growth slowed to a six-month low of 3.5 per cent.

Sterling weakened against the dollar and the euro

The fall in construction, which generates about 6 per cent of Britain’s output, followed ONS figures earlier this week showing a 1.3 per cent decline in May manufacturing. Sterling weakened against the dollar and the euro.

Markit chief economist Chris Williamson said: “These weak figures alongside disappointing May manufacturing output suggest that policymakers will be encouraged to err on the side of caution about hiking interest rates too early in what looks to be a still-fragile recovery. But the figures leave us puzzled, as surveys and anecdotal evidence point to booming business conditions.”